10 Common First-Time Homebuyer Mistakes and How to Avoid Them
10 Common First-Time Homebuyer Mistakes and How to Avoid Them
Buying your first home is exciting, but the process comes with a learning curve. The good news is that most of the stress first-time buyers experience comes from a handful of avoidable mistakes. Understanding them ahead of time can turn a confusing process into a smooth path toward homeownership.
Here are the ten most common mistakes we see first-time homebuyers in Sioux Falls, Harrisburg, Tea, and Brandon make, and how to steer clear of them. For a deeper walkthrough of each one, watch loan officer Chase Lage break it all down in the video below.
Loan officer Chase Lage walks through all 10 mistakes in detail.
Mistake 1: Not Getting Pre-Approved
Falling in love with a home before confirming what you can actually afford is one of the most common first-time buyer mistakes. Pre-approval is different from pre-qualification. Pre-qualification is a general estimate based on the information you share, while pre-approval involves submitting documentation of your income, debts, assets, and credit so your lender can confirm exactly how much you qualify to borrow.
A pre-approval letter shows sellers you are a serious, capable buyer. It strengthens your negotiating position, helps you move faster when you find the right home, and keeps your search focused on properties you can genuinely afford.
Mistake 2: Maxing Out Your Pre-Approval Amount
Just because you are approved for a certain loan amount does not mean you should spend all of it. Choosing a home below your maximum approval can free up hundreds of dollars a month for savings, emergencies, or other goals. A comfortable payment today, with room to plan for tomorrow, is far more valuable than stretching to the top of your budget.
Mistake 3: Overlooking Additional Expenses
Many first-time buyers budget for the down payment and closing costs but forget about ongoing homeownership expenses. Maintenance and repairs are a real cost of owning a home, and unexpected issues, like a furnace failure in the middle of winter, can be financially disruptive if you are not prepared.
A good rule of thumb is to set aside 1% to 3% of your home's purchase price each year for maintenance and repairs. New homeowners should also budget for tools and equipment they may not already own, such as a lawn mower, snow blower, and basic yard or repair tools.
Mistake 4: Skipping the Home Inspection
In a competitive market, it can be tempting to waive the inspection to make your offer stand out. This is a risky move. An inspection protects you from unknowingly buying a home with hidden structural, plumbing, or electrical problems that could cost tens of thousands of dollars to fix. It also gives you leverage to negotiate repairs or better terms before you finalize the purchase.
Mistake 5: Hiding Information on Your Mortgage Application
Leaving out debts or inflating income on a mortgage application is not just risky; it can be considered fraud. Full transparency during the application process protects you from loan denial and potential legal consequences, and it keeps the process moving smoothly.
Mistake 6: Making Large Purchases During the Mortgage Process
Lenders evaluate your credit score and debt-to-income ratio throughout the loan process, not just at the start. Taking on new debt, such as financing a car, can shift your debt-to-income ratio enough to delay approval, change your loan terms, or result in denial.
It is best to avoid large purchases until after closing. If an unexpected major expense comes up, talk to your lender first, so you understand how it could affect your mortgage.
Mistake 7: Not Shopping Around for Homeowners Insurance
Homeowners insurance is required by every mortgage lender and is typically included in your monthly payment. Accepting the first quote you receive can cost you. Comparing at least three insurance quotes can save you hundreds of dollars a year, and it helps you find the right coverage and the right agent, not just the lowest price.
Mistake 8: Losing Urgency After the Offer Is Accepted
Once your offer is accepted, the countdown to closing begins. Your lender will need timely responses to requests for documentation and information throughout the process. Staying responsive, checking email regularly, and turning around paperwork quickly helps avoid delays and keeps closing day on track.
Mistake 9: Mishandling or Failing to Document Your Assets
Moving cash around between accounts, or saving cash outside a bank account, can create real problems during underwriting. Lenders are required to source and season any funds used in a mortgage transaction. If you are saving money, deposit it into a savings account electronically and leave it there so your lender can trace the source, such as payroll or other verified deposits.
If you plan to use gift funds for your down payment or closing costs, talk to your lender before accepting or transferring the gift. The process is specific and varies by loan program, and doing it incorrectly can create complications that affect your approval.
Mistake 10: Quitting or Changing Jobs During the Mortgage Process
Employment stability matters to lenders because it reflects your ability to reliably repay the loan. Changing jobs, even for a better opportunity, can pause or reset your loan evaluation as the lender reassesses your new income and stability. If a job change is unavoidable, staying in the same field and communicating with your lender right away is essential.
Quitting or losing a job during the process is even more serious, since income is the primary factor in your ability to repay the loan. Lenders verify employment again shortly before closing, so any change should be reported immediately. Whenever possible, it is best to stay in your current job until after closing.
The Bottom Line
These ten mistakes are common, but they are also avoidable. With the right guidance and a little preparation in Sioux Falls, Brandon, or anywhere in the Sioux Empire, your first home purchase can be a smooth and even enjoyable milestone rather than a source of stress.
First-Time Homebuyer Resources
Talk to a Fairway Heartland loan officer, Troy Lage, NMLS #400287, at fairwayheartland.com/contact